Category: Agriculture

Michael Morrow is the Executive Director of the Mongolian Artisan Cheesemakers Union (MACU) and has had a wealth of cheesemaking experience developed over many years in different Asian countries. There must be something about Mongolia where he is now bringing small scale cheese technology to Mongolia’s herding communities.

He shares the unique features of Mongolia’s agricultural sector as it pertains to cheesemaking in this interview. Be spellbound as he teases forth the physical aspects of cheesemaking, the operational concerns, the tastes of the Mongolian cheese connoisseur and how Mongolia’s cheesemaking industry is and should be positioned against the international cheese competition.

Interview Transcript

Enkhzul Orgodol: Mike is a serial entrepreneur, started and ran businesses in several Asian countries including China, Singapore and Vietnam. His latest venture, Michael is aiming to build up small scale cheese plants across Mongolia and aiming to produce world class artisan cheese to be distributed internationally. So welcome, Mike.

Michael Morrow: Thank you very much.

Enkhzul Orgodol: On your logo, you have all the five main livestock of Mongolia. A cow, sheep, a goat, a horse and a camel. Mongolians do milk all these animals. So are you planning to make cheese out of all these animals’ milk?

Michael Morrow: Yes. In fact, we’re already making cheese from most of those animals. Last year we made the world’s first Bactrian camel cheese, for example.

Enkhzul Orgodol: But as I understand, you’re also a producer and sort of a dealer. Please explain the company.

Michael Morrow: The company is based on a concept that I began to develop when I was working in a very different business situation in China. The idea of trying to exploit rural milk, especially what we call summer milk, the milk of the hundred days of summer when animals tend to be congregated in large valleys. Herders, these are nomadic pastoralists who are bringing their animals together in grassland areas in a kind of predictable way. But often, very far away from Ulaanbaatar and otherwise, in situations where it’s not easy to exploit that milk in conventional ways. If we put a cheese plant there, we can, within say a 10, 15 kilometer radius use the milk of those nomadic animals to make some of the world’s best cheese.

For this coming year, we have a new project in Batsumber, which is also in Tuv aimag north of us, north of Ulaanbaatar. There, we are investing ourselves in a larger cheese plant that will also have an affinage cellar. We’ll have a national training center for cheese makers.

We aim here to develop a truly world class industry of artisan cheese makers, who will be able to not only do what people do in Europe and France, but to do more, because we have wild grasses, we have nomadic animals, we have a totally organic environment, and we have animals that other people don’t have.

Enkhzul Orgodol: Right. Millions of livestock, right?

Michael Morrow: Millions, but we have yaks, we have camels.

Enkhzul Orgodol: You mean the variety? Yes.

Michael Morrow: We have the variety.

Enkhzul Orgodol: Yes.

Michael Morrow: We can even mix and match milks. We can do all kinds of things that, in some cases, have not been done before. Right now, we’re working on a new project, which I also hope to start this year in the Gobi, with a Mongolian local entrepreneur who already has his own camels, and already has his own small dairy herd, and has a very nice kind of oasis situation. We want to import Awassi sheep. This project, we’re just trying to get off the ground now, but we will build a cheese plant there that maybe the world’s first cheese plant that actually processes, in one place, camel’s milk, goat milk, sheep milk, and cow’s milk.

Enkhzul Orgodol: I think, I’ve never heard anything like that because when I was studying in Singapore, I was really much exposed to the idea of producing camel cheese because back in Singapore, in one of their daily newspaper, there was an article about how camel milk was gaining popularity and how it was sold for about 10 US dollars per liter, or something like that. That idea make me feel like I should research more because we have hundreds of thousands of camels back in Mongolia. If it could produce some type of unique product out of these animals, that could provide lots of opportunities for the local herders, this sounds like dream come true for camel herders and maybe for many other Mongolians, as well.

Michael Morrow: I’m not the best guy to go out a thousand kilometers from Ulaanbaatar and start making cheese. I have a lot of experience that can help to develop the quality of that product, maintain the quality of that product, sell it, market it, and sell it. What we’re trying to do now is to build out on this small network we have. We have a plan to build a hundred cheese plants. That doesn’t mean that I’m going to go out, or MACU is going to go out and invest in a hundred cheese plants. We may invest partially in those cheese plants. We may invest in some of them only. We want to be a facilitator with people who also want to be facilitators of developing this business.

This is the way I worked in China. I never went to somebody and said, “I’m going to buy your business”. You have a business, I’m going to work with you to make your business more successful by creating a win-win situation where you do best what you do at the local area, and I do best what I do at the center.

We are trying to develop, putting a lot of attention on developing affinage facilities. For example, I mentioned the new Batsumber plant we’re making. It will have as one aspect, the building of a large 300 square meter affinage cellar that will be sophisticated enough that we can bring cheeses, not just from, we can store their cheeses, not just from that plant, but from other of our cheese makers. Ultimately, this will be a role that MACU will play. It will help to solve some of the problems of quality by taking possession of the cheeses at the end of the summer, and having dedicated experts to manage the aging of the cheeses into the fall and winter months.

This solves another kind of problem that has stopped cheese making from developing here. It is the problem of how do you get your money out of the cheese? The biggest cost of making cheese in these rural environments is the cost of milk. Even though, our milk costs are low. I think in some cases, they’re among the lowest in the world, but for the small cheese maker, he has to pay for that milk before he gets any income from his cheese. That can limit how much cheese he makes, just because he doesn’t have enough operating capital to finance the milk.

Enkhzul Orgodol: Right. He would need hundreds of liters of milk to produce a certain amount of cheese, right?

Michael Morrow: The general ratio of, we’re using cow’s milk, it varies from one animal to the other, but this is a good example. If we start with about 10 liters of milk, we will end up with one kilogram of cheese.

Enkhzul Orgodol: Right.

Michael Morrow: If I’m going to make 10 tons of cheese in the hundred days of summer, I need a million liters of milk.

Enkhzul Orgodol: Exactly.

Michael Morrow: I have to pay for that milk. Most of that milk, I’m getting from nomadic pastoral families, and generally, I’m buying from the mothers of the families who are taking care of the milking with their children, who are often home from school. Why are they doing this? They’re doing it, generally, to make money to give to those kids to go back to school in the fall. I know this already, personally, that if you don’t have enough money to pay those mothers by the first of September, when the kids go back to school, you’re in deep doo-doo.

Yet, your cheese is not,you may have a little bit ready to sell, but your major sales are going to come much later. This is an operating capital, or a financial management kind of issue that needs to be resolved. What MACU wants to do is to essentially get more deeply involved with its member cheese makers in solving those problems by, first of all, putting orders for certain cheeses.

Enkhzul Orgodol: Exactly. Speaking of orders, how have the customers’ reaction been like in Mongolia, because you currently only selling your products in Mongolia, aren’t you?

Michael Morrow: Yes.

Enkhzul Orgodol: However, on the other hand, Mongolians are not so familiar with artisanal cheese. Although, we do have quite a number of experts living in Mongolia, who might already have the habit of consuming artisanal cheese.

Michael Morrow: Everything you’ve said is true. The other thing you can say is that Ulaanbaatar is becoming a more sophisticated city, day-by-day. For example, the drinking habits of Mongolians is shifting from vodka to wine. With wine, comes quite easily, the cheese, as an association. But, I would be kidding myself, or kidding you, if I said that we have a very vibrant market here. For cheese. It’s particularly the case because, as you know, the country is in deep recession, or even depression now. We’ve had a flight of expatriates, because the mining industry has been slow. All of that said, this first year, we have sold out almost all of our hard cheeses, and we will need to make more for the coming year to satisfy the demand.

Where is the demand coming from? The demand is coming from, certainly, the high end of the market. You have to have some demand from the local population to justify that. What we’re learning, we’ve been in E-Mart for six months, we have a better business than we expected. Can we build an export scale business on that? No, we can’t.

We’re also, of course, in some of the high end restaurants. We’re in the Shangri-La Hotel. They are one of our best customers buying cheese once or twice a week for their buffet. We’re very grateful for that. We’re also proud that our cheeses are being recognized in that way.

We also do direct sales, and we have a growing direct sale. We deliver to homes, and to offices, and to embassies, and so on. We’re very fortunate to have a growing demand from that segment.

Enkhzul Orgodol: Yeah, that’s very good to learn, but despite your insufficient, maybe, amount of production to export yet, as you just mentioned, have you received any interest from overseas markets?

Michael Morrow: Yes, we’ve received a lot of interest from overseas markets and we’re trying to solve the problems to export now. What I was alluding to when I said that we can not grow this business off the domestic market is that we need to open export markets within one or two years, or we will be stuck with too much cheese, and too small a market. Even if the local market begins to expand over the next year or two, it’s unlikely to expand sufficiently to absorb all of our cheeses.

The markets that are showing the most interest in our cheese are the Russian market. Ironically, almost as soon as we opened our doors, we had a ten ton sale to Moscow.

Enkhzul Orgodol: Wow.

Michael Morrow: We could not execute it.

Enkhzul Orgodol: Oh, no.

Michael Morrow: We’ve still not been able to execute it because of lack of these health and hygiene phytosanitary protocols between Mongolia and Russia. We’re working on those now. Similarly, with China, if we target just a few of the big cities in China, we have enough demand there to consume all the cheese we can produce. We have been working on the Japan market and we’re making a lot of progress in Japan. I will go to Japan, I’ve been invited to go to Japan this coming month to introduce our cheeses. This is after sending samples for the last six months, or so. We are working on the Hong Kong market. We want to start on the Korean market.

In fact, we’ve identified not countries, as much as cities. We’ve identified 20 cities that are accessible to us, either by direct air, or rail connection in our vicinity that are potential markets for our cheese. If we can open just one market this year, I think we will have created the hole in the dike that will eventually become a flood.

Enkhzul Orgodol: Exactly.

Michael Morrow: Our plan, if we are able to execute it calls, as I said, for building a network of 100 small cheese plants that will produce about 1,000 tons of cheese in a summer, or in a year, most of it in the summer cheese.

Enkhzul Orgodol: The interest coming from the overseas markets, have they been mostly triggered by the idea of the cheese were made in Mongolia, which is a symbol of organic land, maybe one of the most untouched places, et cetera? Or was it the idea of the cheese being produced from milk from different animals?

Michael Morrow: I think you can’t sell bad cheese. People taste the cheese, and they like the cheese, first of all. Of course, the story, the marketing story is very important. People assume, almost, that this cheese is organic, that it’s exotic, and it’s interesting for that reason. But at the same time, I know this very well because I’m involved in sending samples all the time, and people will say, “We like this cheese, we don’t like that cheese, or this one”, it is much more granular than just selling the pastoral tradition of Mongolia. It’s really about good cheese making.

Enkhzul Orgodol: Quality.

Michael Morrow: Of course, that quality originates, and the ability to differentiate the quality, the taste of this cheese, the uniqueness, it originates back in that story. If the cheese is coming from a yak, it will taste different than a cheese coming from a cow. It still has to taste good.

Enkhzul Orgodol: Yeah.

Michael Morrow: The fact that it is unique, that it’s a kind of cheese that you can not get from somewhere else, makes it easier to penetrate markets.

Enkhzul Orgodol: What about the pricing? You said, Mongolia can maybe be one of the countries with the lowest cost of milk supply. Will that affect the pricing in a favorable way?

Michael Morrow: Remember, yes, the cost of our milk is low, but many of our other costs are high. One of the main reasons is that the scale of our production is very small in each of these individual plants. They’re also a long way from anywhere you got to move the cheese. Those costs are relatively high. Lacking the ability to scale any individual production, we will never be able to produce cheap cheese here. We don’t want to produce cheap cheese. We want to produce cheese that sells at the high end of the world market, and sells at the high end of the world market not just because it came from Mongolia, but because it’s among the best cheese made anywhere in the world. We believe we can achieve that, and we have a lot of things going for us because it is coming from these remote locations, and from exotic animals, and so on. It’s still, ultimately, it has to be very good cheese that can compete at the high end of the market.

But, at the high end of the market, we are very cheap. We have the ability to provide high quality product at very affordable prices, at the high end. The world market for cheese is somewhere between 20 and 30 million tons of cheese. Most of that cheese is what we call, “Industrial cheese”. We don’t want to have any part of that business. We want to be part of the high end artisanal cheese business, which if you look at it right now, is actually the fastest growing segment of the cheese market in the world. Still small, but growing.

Enkhzul Orgodol: Right. You’ve been saying that you’re aiming to build up hundred small scale cheese plants across Mongolia. In doing so, are you getting any government support, or anything from the public organizations, maybe tax rebate, or anything like that?

Michael Morrow: No. We are fortunate in that all dairy products in Mongolia, producers of dairy products in Mongolia, do not pay VAT. This is very nice. The government is also talking about small enterprises, essentially, that the income tax on their incomes being reduced almost zero.

Enkhzul Orgodol: Newly introduced, right?

Michael Morrow: Yes. I’m not sure it hasn’t filtered down to my balance sheet yet, but anyway, it should happen, and that would be an advantage to us. In fact, it’s an advantage to our model because rather than having one big enterprise, we will have a lot of small enterprises, most of which, at least for the formative years, will fall under that ceiling so that they will end up having being able to take advantage of the government’s incentives. That’s great. But, otherwise, we don’t get any public support. This is purely an entrepreneurial effort. Some of it is my money.

Now, individual cheese makers, small cheese makers, are coming in, and we have a five year plan, and in that five year plan, we have provision for tranches of investment. We were fortunate to get the first tranche of angel financing for our plan for 2017. We got that just in time, in November, and were able to go ahead with what we want to do this year. We will be looking for more capital, but we’re not looking for charity.

When I started looking at the dairy industry, I realized for many reasons, this also goes back to my experience in China, that I could not do it the way other people were doing it. I didn’t have the capital. The market was already crowded with people doing it the conventional way. I think that this is not just about dairy, this is about Mongolia, generally, you have to think outside the box, and you have to kind of have x-ray vision that looks through walls, and so on, if you’re going to be an entrepreneur in this place. Is it high risk? Yeah, it’s high risk. Is there a lot of opportunity? A lot of opportunity. You don’t approach it the same way you do elsewhere.

Let me give you a specific example. All of the advice that Mongolia got after the collapse of socialism here, with regard to the dairy industry, was about building big plants, and importing new kinds of animals. You have these … “Your cows only give 10, 12 liters of milk. You should bring in Friesian’s or Montbéliarde’s. They give, maybe in France, or the Netherlands, and they’re kept in barns, and they may give 40 liters of milk a day. Why are you messing around with these traditional animals?”

Well, fast forward 10, 15 years, and we see what has happened. We do have large dairies established here around these imported animals. What is it taking to get those animals even to survive in Mongolia? It’s taken millions of dollars of investment. They have to live in barns, more than six months of the year. They have to be fed. They drink humongous amounts of water. They eat large amounts of grain. And at the end of the day, under Mongolian conditions, they don’t produce 40 liters. They may produce 15 to 20 liters of milk, and a lot of them die. Okay?

In Mongolia, we know this by driving into the country side. A Mercedes-Benz is not going to do you any good. I mean, a Mercedes-Benz limousine. You need a four wheel drive vehicle. I much rather have a Suzuki Jimny, a tiny little four wheel drive for going almost anyplace because if I get stuck, I can lift it out, almost with my hands. We need to think in very different ways if we’re going to be successful in Mongolia.

Enkhzul Orgodol: Right. I actually asked the same question from another entrepreneur who was interviewed for the project. There was an event, recently organized between the businesses and the Prime Minister, and there, the PM said that, “Besides mining, Mongolia has to look at other sectors, specifically agriculture sector to leverage on”. In doing so, he was suggesting that the Mongolian entrepreneurs in the agriculture sector, especially the farmers, should work with international corporations that are recognized worldwide, or better recognized internationally and becoming suppliers to those international corporations.

I was thinking, I was having this same feeling about, of course, maybe, there can be some advantages for the local farmers in learning international standards from those kind of partnerships. At the same time, do we have the capacity to keep up with the kind of volume, or kind of expectation these international corporations would be setting from their investment? On the other hand, should we look at more unique ways, such as yourself, and looking at the niche market, and developing innovative solutions to what we already have that can be sustained with these relatively small number of professionals, or the labor we have? Also, that can survive in this environment with lots of barriers like such as the lack of infrastructure. What would be your response to that?

Michael Morrow: My response is, I think you know, Mongolia is a unique place. It should not try to be China. It should not try to be Russia. It should not try to be the United States, or Western Europe, or anything.

You know, when I was a young man, I worked in Indochina. That meant I was a journalist covering the war. I was in Vietnam, Laos, Cambodia, Thailand. I spent quite a bit of time in Laos for a while, and I quickly became aware, as the Laotians were struggling, actually, just to maintain their own independence, I became aware that Laos could never be Vietnam. It could never be Thailand. Laos, could only be Laos.

Mongolia is a very similar situation to that. What we should do is celebrate and use to the advantage of Mongolia. What are Mongolia’s comparative advantages? It has a great grassland commons. One of the biggest, least spoiled in the world. This is not only a national treasure, it’s an international treasure that has value, not just as a monument to look at, but really as something to derive economic and social benefit from. On that commons, we have a long tradition, history, culture, of pastoral nomadism, of nomadic pastoralism, which is recognized, almost as a kind of a symbol of Mongolia.

From those animals, we have products. Those products are much more valuable than perhaps we think they are. There needs to be something of a paradigm shift in the way that Mongolia is approaching, especially the post-industrial world that we’re entering now. We’ve missed the industrial revolution. It’s over. Let’s get on with being part of the future, not part of the past.

T To do that, we have to, in some ways, celebrate the fact that we kind of missed the industrial revolution. Everybody envies Mongolia. We have all of this stuff that everybody doesn’t have now. Do you want to go and live in China? I lived in China, I speak Chinese fluently, I’ve spent much of my life with the Chinese. I don’t want to live in China anymore. The whole process of industrializing China, of developing China, has been destructive to the environment, and destructive to the culture, and destructive to many of the things that people hold dear, especially the Chinese people hold dear. Mongolia should not pursue. This is a movement in the world now to get back to basics. To get back to natural foods. I think that is the opportunity for cheese making in Mongolia.

Enkhzul Orgodol: I think, it’s actually an opportunity, not only for the cheese maker, but the whole agriculture sector, farming, animal husbandry, et cetera.

Michael Morrow: We also are marketing honey, starting to market honey, very selectively from just two honey makers in Mongolia. Honey goes very well with cheese, but as you were saying, natural honey, especially monofloral honeys from wild flowers, these are very, very valuable products. Not only in a commercial sense, but I would say in a nutritional sense. If you’re going to take sugar, this is as good a way to take it as any.

Enkhzul Orgodol: Mike, thank you very much for a very interesting and insightful discussion on how Mongolia can leverage its organic grassland and number of livestock to position itself strategically in not only in the region, actually, in the world, and all the best in the endeavors that you are pursuing at the moment. Especially, in cooperation with the local producers who needs lots of support, and strategic directions, strategy partners like yourself. I wish you all the best.